With a labor crunch on, how do you add two employees a day for two years straight?

One morning last February Gloria Inabinet was reading her local newspaper, the State, when she spotted an ad: "Tech special schools, in cooperation with Midlands Technical College, will conduct a special training program...for potential employment opportunities that will exist at Select Comfort Corp." Inabinet already had a job at a Columbia, S.C., dress manufacturer, where she had spent 29 years as a sewer, but she was now feeling threatened by the company's aggressive downsizing. The ad was enticing, promising "excellent benefits/vacation plan" and "excellent training/skill-based pay" as well as a "team environment." There was just one catch: after a person spent six weeks and approximately 45 hours brushing up on math skills, learning about the company, and getting up to speed on total quality management and world-class manufacturing methods, there was no guarantee of a job. Nonetheless, Inabinet was "ready to take the risk because I knew I would benefit from the program."

Like many of her fellow trainees, Inabinet worked nine-hour days at her job and then rushed home to shower and eat dinner before racing off to spend three more hours in a classroom. That commitment alone gave Select Comfort's managers important insight into the work ethic of their candidates. And that had been the point all along.

During the past 10 years Select Comfort Corp. (#82) has roused a rather sleepy industry by developing a new technology for, of all things, mattresses. It's a quirky concept--a high-quality air mattress with two chambers, each of which can be adjusted for firmness--aimed at making 100-year-old innerspring technology obsolete. The company promised a better night's sleep in 90 days, with a money-back guarantee, and aging baby boomers with aching backs took the bait. Deluged with market demand, Mark de Naray, who recently stepped down as CEO but remains on the board, grew the company from $4.4 million to $98.7 million in sales in five years. This year, like last year, Select Comfort is adding an average of two employees on every working day. It now has a total of 1,300 employees working in 184 retail stores in 40 states, as well as a direct-sales operation at the home office in Minneapolis. How is it possible to staff such a growing behemoth in the face of 4.8% unemployment (the lowest in 24 years) and enormous turnover rates (more than 100% annually in the average retailing or direct-sales company)?

For companies like Select Comfort, which offers competitive wages, good benefits, and plenty of growth opportunities, the problem isn't even just finding employees--it's finding the right employees. "A mistake on the people side of the equation is more critical than any financial mistake," says de Naray. Indeed, because replacing an employee costs approximately three times his or her wages in lost productivity, training, and recruiting costs, people mistakes are financial mistakes. Even so, it's easy for growing companies to disregard the importance of a sound recruiting strategy since today's exigencies often take precedence over, well, anything else.

But not from where de Naray used to sit. During his five-year tenure as CEO, he made sure that recruiting and hiring programs became so ingrained in the corporate structure that Select Comfort never had to go out and find workers; the company simply never stopped looking. In just about every decision it makes--from pinpointing the location of a new factory to measuring its top-performing employees--Select Comfort broadcasts a message: We're as much in the business of recruiting as we are in the business of moving mattresses.

Building a New PlantFinding a strategic spot for hiring

In 1996, when demand for the company's mattresses began to exceed the Minneapolis plant's capacity, Greg Kliner, senior vice-president of operations, searched for a locale that not only would provide strategic distribution advantages but also would offer a plentiful supply of skilled labor. He settled on South Carolina, where a state incentive program promised to pay all recruitment and training costs. "The biggest issue there was underemployment," Kliner says. "You had sewers not being paid very much or paid by the piece. We were inundated with applications." The company positioned itself as an employer of choice, promising higher wages, no piecework, and a focus on teamwork and quality rather than on production numbers. "We weren't looking for cheap labor," says Kliner.

The hiring criteria alone were a test of the applicants' sincerity: the five-week pre-employment training program would require a significant time commitment with no guarantee of a job. Not that that seemed to deter anyone. Eric Hopfner, the plant's human resources manager, interviewed more than 400 applicants to find his first 100 trainees, approximately two-thirds of whom were already employed. "We were looking for a combination of skills and attitudes," he says. "You can teach skill sets, but you can't teach attitude." The training program gave company managers the opportunity to identify people who could help bring the plant on line quickly. It also gave Hopfner an inventory to draw from as the plant grew. The result: the plant was fully operational and exceeding output projections 10 weeks after opening its doors, much faster than expected. Plans for a similar operation are under way in the Southwest.

Knowing the Best CustomersA solid recruiting base

Before entering a new retail market, Select Comfort sends postcards to "Comfort Club" members, customers who've spent at least $1,200 on the "sleep system." "We knew if we had converts to what we were doing, we could train them in the selling process," says de Naray. Karen McFarland's husband, who has a degenerative spinal disease, was intrigued by a Select Comfort magazine ad he saw about five years ago. Sidestepping his wife's protests, he ordered it from a neighbor's house. McFarland now believes the bed saved her husband from surgery.

It was McFarland's enthusiasm for the product that persuaded area sales manager Tim Brasfield to hire her to manage the Cary, N.C., store, despite her lack of experience in retail management. Her store exceeded its sales goals for 11 of the past 12 months, earning it three top-performance rankings. Of course, the company can't count on its customers to fill its retail ranks. That's why Select Comfort's regional and area managers scope out employees at other high-end retail establishments such as electronics and furniture stores. "You need to view people in the field," says Brasfield.

Julie Secora, a retail human-resources manager, interviewed Johanna Ross, now manager of the Palm Desert, Calif., store, after observing her at the jewelry counter of a large department store. "She was pretty dynamic and very upbeat," says Secora. Seeing her candidate in action, she says, gave her the confidence to make a quick decision. That strategy has paid off. According to Karen Jones, vice-president of human resources, retail staff turnover is just 35% a year, compared with the national average of more than three times that. The effort offers another advantage as well: by attracting employees from a variety of different industries, the company benefits from the diverse skills and types of experience that they bring to the job, de Naray notes.

Typically, employees receive a bonus of $100 to $500 for each referral who is hired and stays with Select Comfort for three months; the ante is upped when the company's needs are urgent. Mary Malchow, retail operations coordinator, has earned $750 in referral bonuses for employees she recruited during the past two years. "Before I came here, I worked in a telephone call center, so I had a large pool of people to recruit," she says. From the company's perspective, referrals like Malchow's reduce the risk of a bad hire, since employees generally think carefully before recommending a friend or a former coworker; no one wants to be associated with a poor performer.

Identifying Top PerformersTraits to hire by

Select Comfort not only keeps track of its best-performing employees but also attempts to isolate which characteristics make them productive. The company uses that information as a guide in its hiring. "We do focus groups where we talk to our top performers about what makes them successful," says Sara Evans, human-resources staffing coordinator. Those employees are also asked to take a standard personality-profiling test, which requires them to identify behaviors that are most and least like them (for example, gentle/kind, humble/reserved, and so on). Computerized scoring generates a 20-page personality profile, information that is used to develop interview questions for prospective employees. A top performer might also be asked to help develop questions for a series of multidisciplinary interviews with job candidates. The glitch: "The profile you were looking for two years ago isn't the same as it is today," says de Naray. So the company updates the profiles (the top performers might be different employees) every year.

"Our interviewing process is intense," says de Naray. "We spend an enormous amount of time probing who you are as an individual." Prospective employees may be asked how they deal with frustration, to describe a milestone in their careers, or how they organize tasks. "They wanted to make sure we had a good match around principles and values," recalls Rob Hawthorne, the newly hired CEO. "Then they needed to find out if I had the skills to run the company."

Defining JobsIncorporating a training function

At Select Comfort all new employees at the home office go through a two-day orientation at the University of Select Comfort, an internal training facility that also offers ongoing skills courses. New hires at the company's retail stores are trained by their area managers but also complete a video training program on Select Comfort's specific selling method, called Desire Fulfillment Selling (DFS).

"We get an exam that comes to us every quarter," says Karen McFarland. "Or sometimes we might get a surprise visit from corporate headquarters and be given a test." A monthly video called Talking Select keeps all employees abreast of new production techniques, plans for expansion, the results of market research, or any number of other companywide issues.

The company also relies heavily on its employees to help ease the transition for new hires. When Gloria Inabinet and her colleagues in South Carolina started their new jobs, seven master sewers were flown in from the company's Minneapolis manufacturing plant to help train the newcomers. "They didn't just train me, but they taught me how to be a trainer, too," says Inabinet, who was elected by the master sewers and her supervisor as one of four people on her shift qualified to train others. In Minneapolis, several departments use the buddy system to integrate new employees. "We take new representatives and pair them up with more experienced employees," says Amanda Birnstengel, a customer-service supervisor. Employees who volunteer to be buddies earn points toward pay increases.

"We intend for people to stay with us a long time," says de Naray. He's convinced that the key to employee longevity--and its corresponding effect on the bottom line--is to reduce the risk of a mismatch before making an offer. "Once someone joins, we expect them to be the right person from day one," he says. "We know they have some skill sets or characteristics that the company needs, so we don't waste time up front not trusting them." With that burden lifted, the company can set its sights on the next 1,300 employees.

HIRE POWER

Not every company has--or needs--as comprehensive an approach to recruiting as Select Comfort's. For some Inc. 500 companies, it all boils down to a handful of successful techniques, including:

If You Can Find This Ad, You Can Have This Job. At Bristol Technology Inc. (#140), CEO Keith Blackwell finds 80% of his new hires through the company's Web page, which introduces job seekers to everything from the company culture to its picturesque hometown, Ridgefield, Conn. Applicants E-mail their rÉsumÉs, which pop up immediately on the computer screens of key managers. "We respond to everyone within 24 hours," says Blackwell. "And that allows us to interview them, make them an offer, and hire them before anyone else does."

Are There More at Home Like You? Nepotism is the norm at Betek Manufacturing (#275), where 30% of all employees have a relative working nearby. Nearly 80% of all hires are Vietnamese or Mexican, from cultures in which family ties typically run deep. "When they work together, they can carpool and also train new people more easily," says CEO Binh Nguyen.

Do You Want This Job Badly? How Badly? I CAN'T HEAR YOU! When Forrest Wheat is looking for a few good men (or women), he usually relies upon the good judgment of his former employer--the military. About two-thirds of Wheat International's (#174) workers are retired military personnel, armed with "a can-do spirit," says the CEO. Wheat's a navy man, but that hasn't stopped him from hiring the occasional marine and even an air force colonel.

We'll Take You--and Your Flock. When Howard Getson hired four Baptist ministers as key programmers for his software-development company, IntellAgent Control Corp. (#221), it was a blessing in disguise. Each minister has recruited several members of his congregation, which, says Getson, "has created an unparalleled atmosphere of kindness and integrity." There's an added benefit: "They atone for my sins," says Getson.

Take a Job Here, and You'll Never Have to See Me Again. Only seven of Ray Neverdahl's 100 employees work out of Neverdahl-Loft & Associates' (#182) main office in Lincoln, Neb.; the rest are scattered throughout the country. Since the company does computer consulting in 18 states, Neverdahl gives potential employees a wide choice of locations. "Our turnover is low because the consultants are living in the area of their choice," says Neverdahl.

You Can't Hide from Us, So You Might as Well Work for Us. K.C. Sukumar isn't bothered by the scarcity of American software developers, even though programming talent is the lifeblood of Taj Technologies (#294). He recruits globally, targeting professionals in India and the Philippines who have worked for U.S. multinationals overseas. "They get on the plane on Saturday and arrive Monday ready to work," says Sukumar.

Here Comes the Bribe. Bristol Technology (#140) gives anyone who successfully recommends a hire a $675 Cannondale mountain bike. At AccuData America (#329), any employee referral is worth $2,000, with $500 paid out immediately, another $500 paid after three months, and the remaining $1,000 given six months after the hire. Employees at Analytical Graphics (#408) collect their entire $2,000 bounty in 90 days, while at Omicron Systems (#293), half the $3,000 referral bonus is paid in three months, the other half at the end of the year. Finally, Hilton H. Augustine Jr., CEO of Global Management Systems (#83), rewards employees with immediate bonuses of $2,000 for technical referrals and $1,000 for nontechnical ones. "It's not the employee's fault if the referral doesn't work out," he says. "That's management's responsibility."